Cryptocurrency is booming once more. Brace for the rollercoaster

Challenge yourself with today’s puzzles.
Crossword
Polygon
Sudoku
As a sign that cryptocurrency is back, it could not have been clearer. The richest man in the world was charged by the soon-to-be most powerful man in the world with slashing government spending. Elon Musk, the slasher-in-chief, suggested that the new office would be called the Department of Government Efficiency (or DOGE).
That sounds like a big, serious department for a big, serious job. It is also a humorous homage to dogecoin, the cryptocurrency that was created as a joke but has been heavily promoted by Musk. Since the presidential election the cost of dogecoin has almost doubled, taking its market cap to £58 billion. The value of a bitcoin, the original cryptocurrency, spiked after Trump’s victory and was at almost $100,000, the highest price in its 15-year history, before dropping back slightly.
Cryptocurrency? Really? Didn’t that all end in a thousand smoking data mines while those of us who didn’t really understand what was happening smiled smugly? Sam Bankman-Fried, the poster boy for crypto criminality, is in federal prison, his cryptocurrency platform FTX filed for bankruptcy and many of the celebrities who jumped on the crypto bandwagon may feel a little foolish and, in some cases, a lot poorer.
But cryptocurrencies survived and the industry poured a huge amount of money into backing supportive candidates in the US election. The president-elect is a convert to crypto and in Britain more of us are investing in these digital currencies.
Cryptocurrencies, which are not issued by a central bank, are based on mathematical formulae that create a finite number of coins, which are recorded on a database called a blockchain. They have been around for 15 years, during which time their value has fluctuated wildly. During the boom a few years ago, money poured into promoting cryptocurrencies to the individual investor and A-list celebrities were recruited to lend their star power. Gwyneth Paltrow promoted an app that enabled users to gift bitcoin to “democratise” the process of owning the currency.
Tom Brady, then a star American football player, and his supermodel wife of the time, Gisele Bündchen, were ambassadors for FTX, as was Naomi Osaka, the tennis player. Larry David, the comedian, appeared in an advert for the same cryptocurrency exchange. In an advert for Crypto.com, another exchange, Matt Damon likened the arrival of cryptocurrencies to the dawn of the age of flight. Reese Witherspoon also wrote on social media that in the near future we would all have crypto wallets. On Twitter Paris Hilton showed her millions of followers her two lapdogs Crypto and Ether (the currency used for trading non-fungible tokens, or NFTs). NFTs were her “passion”.
In 2022 the Super Bowl was dubbed the “Crypto Bowl” because there were so many adverts for cryptocurrencies in the television coverage, where a 30-second slot could cost $7 million. When the market crashed soon afterwards, celebrities — some of whom also lost large sums — were criticised for driving fans to risky investments.
• A user’s guide to crypto
The face of the crypto crash was Bankman-Fried, the founder of FTX, who was described at his trial as a “calculating math genius who sought power and influence while knowingly committing wrongdoing”. When the cryptocurrency market began to collapse, his customers tried to withdraw their money. However, billions of dollars were missing — Bankman-Fried had siphoned it into his hedge fund. His net worth collapsed $16 billion in a day and FTX declared bankruptcy.
Bankman-Fried, who is now 32, ran his fraudulent empire from a penthouse in the Bahamas with what might be described as stratospheric levels of teenage boy energy. In his book about Bankman-Fried and his downfall, Michael Lewis describes how the fraudster played a video game while taking a call from Anna Wintour, the editor-in-chief of Vogue.
Changpeng Zhao, the founder of Binance, another crypto exchange, was jailed for four months this year and the company was fined $4.3 billion after admitting to allowing criminals, child abusers and terrorists to launder money on the platform. The US Security and Exchange Commission (SEC) has brought a series of other cases against firms in the sector.
In contrast to the Biden administration’s crackdown, Trump — whose new “first buddy”, Elon Musk, has also called himself “the dogefather” — has promised to be a friend to the crypto industry. In 2021 Trump called crypto a scam but last summer he attended a crypto conference in Nashville and said that he wanted America to be “the crypto capital of the planet”. He pledged to maintain a national bitcoin stockpile, create a crypto “advisory council” and fire the chairman of the SEC, Gary Gensler, even though he doesn’t have the power to do so.
• The DOGE plan to reform government
Crypto companies spent tens of millions of dollars backing pro-crypto congressional candidates, including raising $40 million for Bernie Moreno, the Republican in the Senate race in Ohio, in his victory over Sherrod Brown, a Democrat who was chair of the Senate banking committee and had called for more oversight of crypto.
Trump’s social media company appears to be exploring the idea of creating a cryptocurrency payment service after applying to trademark the name TruthFi. Shares in Bakkt, a crypto trading platform, rose after the Financial Times reported that Trump Media was in discussions to buy it.
In the UK Tulip Siddiq, economic secretary to the Treasury, said recently that “it is clear crypto assets are here to stay” and the proof of that is that small investors are not just teenage boys dreaming of becoming millionaires before they leave school. Research released this week shows that 12 per cent of UK adults own crypto, up from 10 per cent two years ago. Holdings are up from an average £1,595 to £1,842.
These volatile currencies may not be about to replace conventional money but they are not about to disappear either. Those who prefer more tangible assets are wary. After all, once you’ve invested you need to rely on other people not being too confused and intimidated to covet what you have as well.
• Bitcoin hits record as Trump vows to make US the world’s crypto capital
To some of us it’s a bit like the world of conceptual art, where this month a banana stuck to a wall with duct tape sold at Sotheby’s in New York for $6.24 million. The artwork, Comedian, by the Italian artist Maurizio Cattelan, was bought by Justin Sun, a collector and the founder of, yes, a cryptocurrency platform.
Sun said that the work “represents a cultural phenomenon that bridges the worlds of art, memes and the cryptocurrency community”. He expected that, with the election of Trump, the value of cryptocurrencies would rise and the crypto community would buy more art. In the meantime he planned to eat the banana.